Product Overview

In June 2024, Elliott Investment Management L.P. (EIM) purchased a $1.9 billion stake in Southwest Airlines Co. (LUV), representing approximately 11.3% of LUV’s market capitalization, making EIM and Vanguard Group, Inc., the company’s largest shareholders. An open letter from EIM stated a desire for change and improved execution. Bob Jordan, LUV's CEO, must present a compelling vision and plan. The case describes LUV’s successful disruption of the US airline industry and details LUV’s well-regarded historical business model. Then it explores more recent events, including several setbacks LUV sustained. It describes how other airlines have replicated many of LUV’s original process improvements and continued to innovate in both the luxury/full-service and budget market segments. While LUV’s focused business model was originally highly successful, that same focus may have contributed to some of LUV’s recent setbacks. The case challenges students to present views on how Jordan should respond to recent events. This case provides an excellent high-level introduction to operations management by connecting operations and strategy. It is suitable for a graduate, undergraduate, or executive education audience. Students consider the difference between strategy (what and why) and operations (how), and explore the competitive dimensions that inform LUV’s market position relative to its peers both historically and in the present day. At Darden, this case has been successfully used in the core operations course for full-time, part-time, and executive MBA programs. When used in this context, this case is taught as the first of a two-part introduction to operations management that grounds students in the basic relationships between the operational choices that are part of a business model and a firm’s strategy, market positioning, and financial performance. This case establishes the connections between a firm’s strategy (in relation to competition) and how this strategy can be achieved through consistent operating decisions. The second case, “Can Zara Fast-Forward Fashion?” (UVA-OM-1817), builds upon these frameworks in two ways: with an increased focus on the trade-offs involved in a holistic operating model, which can at times appear to be in conflict with financial results; and with a deeper dive into the impact the operating model can have on specific external measures of financial performance.

Learning Objectives

1. Discuss the impact of operations strategy on a firm’s competitive positioning. 2. Introduce the production frontier and the importance of strategically considering trade-offs. 3. Explore the benefits and drawbacks of a focused operational strategy.